Energy Sector Strategy: Sustainable Energy for Asia · 2020-03-02 · 1 Energy Sector Strategy: Sustainable Energy for Asia1 Energy is central to nearly every major challenge and

Energy Sector Strategy:

Sustainable Energy for Asia

15 June 2017

ii

Acknowledgement

On June 15, 2017, the Board of Directors of the Asian Infrastructure Investment Bank

recorded its support for this “Energy Sector Strategy: Sustainable Energy for Asia.” The

Strategy was developed through an iterative, consultative process, including two rounds of

public consultations. The Bank wishes to thank all the parties who provided comments for

their valuable contributions.

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Table of Contents

Abbreviations ....................................................................................................................................... iv

Introduction ........................................................................................................................................... 1

The Global Energy Landscape............................................................................................................. 2

Issues and Challenges ........................................................................................................................... 3

Lessons Learned from MDB Energy Sector Investment in Asia ...................................................... 9

Objective of the Energy Sector Strategy ........................................................................................... 10

Guiding Principles .............................................................................................................................. 11

Implementation ................................................................................................................................... 13

Results Monitoring Framework ........................................................................................................ 19

Annex 1: Definitions for Asia and Region and Income Classification ........................................... 20

Annex 2: Preliminary Results Monitoring Framework .................................................................. 22

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Abbreviations

CO2 Carbon dioxide

EE Energy efficiency

ESF Environmental and Social Framework

GCF Green Climate Fund

GDP Gross Domestic Product

GEF Global Environment Facility

GNI Gross National Income

GWe Gigawatt of electric output

GWh Gigawatt hour

IEA International Energy Agency

MDB Multilateral development bank

Mtoe Million tons of oil equivalent

MW Megawatt

MWe Megawatt electrical

MWh Megawatt hour

NDCs Nationally determined contributions

OECD Organisation for Economic Cooperation and Development

PPP Public-private partnership

RE Renewable energy

SEforALL Sustainable Energy for All

SDG 7 Sustainable Development Goal 7 – Affordable and Clean Energy

T&D Transmission and distribution

TWh Terawatt hour

UN United Nations

UNSD United Nations Statistics Division

US$ United States Dollar

WHO World Health Organization

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Energy Sector Strategy:

Sustainable Energy for Asia1

Energy is central to nearly every major challenge and opportunity the world

faces today. Be it for jobs, security, climate change, food production or

increasing incomes, access to energy for all is essential. Sustainable energy is

opportunity – it transforms lives, economies and the planet.

Sustainable Development Goal 7 – Affordable and Clean Energy

Introduction

1. Energy services are essential to economic activity, social development and quality of

life. They fuel the economy and facilitate the operation of factories and businesses. They are

essential to deliver goods and services and to meet people’s mobility needs. Finally, they

contribute to wellbeing, social development and quality of life, and are essential to lift

vulnerable people out of poverty. As noted by the United Nations (UN) Secretary-General:

“The decisions we take today on how we produce, consume and distribute energy will

profoundly influence our ability to eradicate poverty and respond effectively to climate

change.”2

2. The Bank’s Energy Sector Strategy (Strategy) focuses on sustainable energy for Asia.

The Strategy’s objective is to provide the framework, principles, and operational modalities

to guide the Bank’s energy sector engagement, including the development of its project

pipeline and future subsectoral lines of business. Strategy preparation benefitted from two

rounds of public consultations, an overview of which is provided on the Bank’s website

(www.aiib.org).

3. The Strategy is consistent with the Bank’s “Lean, Clean and Green” core values. The

Strategy embraces, and is informed by, the principles underpinning Sustainable Energy for

All (SEforALL), the 2030 Agenda for Sustainable Development, and the Paris Agreement

(Box 1). It lays the framework for the Bank to support its client countries to: (i) develop and

improve their energy infrastructure; (ii) increase energy access; (iii) facilitate their transition

to a less carbon-intensive energy mix; and (iv) meet their goals and commitments under these

global initiatives.

1 In this document, references to “Asia” and “Region” include the geographical regions and composition classified

as Asia and Oceania by the United Nations (Annex 1). This definition does not include Russia. However, Russia

is a regional member of the Bank and therefore is listed separately, or additionally, in various places in this

document. 2 “Energy for a Sustainable Future,” Foreword, The Secretary-General’s Advisory Group on Energy and Climate

Change (AGECC), Summary Report and Recommendations – 28 April 2010, New York.

2

Box 1: Global Initiatives

The Sustainable Energy for All (SEforALL) initiative, launched by the UN Secretary-General Ban

Ki-moon in September 2011, has three objectives it seeks to meet by 2030: ensure universal access

to modern energy services; double the share of renewable energy in the global energy mix; and

double the global rate of improvement in energy efficiency. The initiative was launched to coincide

with the UN General Assembly Resolution 65/151 of 20 December 2010 that declared 2012 the

International Year of Sustainable Energy for All.

The 2030 Agenda for Sustainable Development is a set of 17 aspirational “Sustainable

Development Goals” with 169 targets, developed under UN auspices and involving 193 UN

Member States and global civil society. The goals are contained in paragraph 54 of the UN General

Assembly Resolution A/RES/70/1 of 25 September 2015. One of those goals, Sustainable

Development Goal 7 (SDG 7), calls for ensuring access to affordable, reliable, sustainable and

modern energy for all by 2030.

The Paris Agreement’s central aim is to strengthen the global response to the threat of climate

change by “holding the increase in the global average temperature to well below 2 degrees Celsius

above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5 degrees

Celsius.” The Agreement also aims to make “finance flows consistent with a pathway towards low

greenhouse gas emissions and climate-resilient development.” According to the Agreement,

countries shall publicly outline nationally determined contributions (NDCs) that they intend to

achieve for reductions in greenhouse gas emissions. The Paris Agreement was agreed by 197

Parties during the 21st Conference of the Parties (COP 21) of the UN Framework Convention on

Climate Change in Paris in December 2015, and entered into force in November 2016.

Sources: Sustainable Energy for All, www.se4all.org; the 2030 Agenda for Sustainable Development,

sustainabledevelopment.un.org/post2015/transformingourworld; the Paris Agreement, unfccc.int/paris

agreement/items/9485.php

The Global Energy Landscape

4. The Strategy has been developed in a global energy landscape that is characterized

by a growing sense of energy insecurity and widespread environmental concerns at national,

regional and global levels. Yet it is also a time of shared hope and promise, as demonstrated

both by ambitious goals and commitments under global initiatives, and by technological

advances that will ease the transition towards more sustainable development. Bank support

will assist client countries to meet their nationally determined contributions (NDCs)3 under

the Paris Agreement and to reap the benefits of new technologies and innovation.

5. Energy access and environmental concerns. Around 1.1 billion people worldwide

still live without access to electricity. Lack of access to energy limits opportunities and

hampers economic and social development. Therefore, promoting access to affordable and

reliable energy is fundamental to driving sustainable economic growth and ending poverty.

Worries about energy security and pricing volatility have been a concern for over four

decades. These concerns have been compounded by the free fall of oil prices after their peak

3 According to Article 4, paragraph 2 of the Paris Agreement, each Party shall prepare, communicate and maintain

successive NDCs that it intends to achieve. Parties shall pursue domestic mitigation measures, with the aim of

achieving the objectives of such contributions.

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in the late 2000s. The extremely high pollution in many of Asia’s large cities has heightened

concerns about environmental risks and their impacts on the health and wellbeing of the

population. Asian countries, especially the most populous ones, are already experiencing

floods, devastating storms and drought, and they will face higher risks if climate threats are

not mitigated (Table 1). Environmental and social risks and impacts continue to be an

important issue in the planning, implementation and operation of energy infrastructure.

Particular attention needs to be given to addressing ecosystems, biodiversity and social issues.

Table 1: Countries Most at Risk of Five Climate Change Threats

Drought Flood Storm Coastal Impact Agriculture

Malawi Bangladesh Philippines All low-lying island states Sudan

Ethiopia China Bangladesh Vietnam Senegal

Zimbabwe India Madagascar Egypt Zimbabwe

India Cambodia Vietnam Tunisia Mali

Mozambique Mozambique Moldova Indonesia Zambia

Niger Laos Mongolia Mauritania Morocco

Mauritania Pakistan Haiti China Niger

Eritrea Sri Lanka Samoa Mexico India

Sudan Thailand Tonga Myanmar Malawi

Chad Vietnam China Bangladesh Algeria

Kenya Benin Honduras Senegal Ethiopia

Iran Rwanda Fiji Libya Pakistan

Source: World Bank (highlighting added for countries in Asia)

6. Primary energy consumption growth driven by non-OECD countries. Since 2000,

global primary energy consumption grew on average 2.2 percent per year to reach about 13.7

billion of tons of oil equivalent (toe) in 2014. However, during 2010–2014, it grew at 1.9

percent per year, a slower growth rate than prior to the financial crisis (2.7 percent per year),

likely due more to weaker global economic growth than to gains in energy efficiency (EE).

From 2000 to 2014, the primary increase in energy consumption was driven by countries not

in the Organisation for Economic Cooperation and Development (OECD); the non-OECD

countries accounted for 98 percent of growth during this period and reached 58 percent of

total global consumption in 2014.

Issues and Challenges

7. The specific issues that countries in Asia4 confront in their energy sectors are similar

to those facing most non-OECD countries – they are driven by the need for affordable,

sustainable and reliable energy systems to support national, regional and global economic

growth.

8. Asia is endowed with abundant energy resources:

More than half of global conventional oil and gas reserves are in Asia: 3,795

trillion cubic feet of gas and 888 billion barrels of oil (55 and 54 percent of world

reserves, respectively), most of which are concentrated in Western Asia: Saudi

4 See Annex 1 for countries included in reference to Asia, OECD Asia and Non-OECD Asia.

4

Arabia, Iraq, Kuwait, Qatar and United Arab Emirates. In addition, Russia has

1,688 trillion cubic feet of gas and 80 billion barrels of oil (25 and 5 percent of

world reserves, respectively).

Asia’s coal reserves are also abundant, amounting to more than 369,497 million

short tons and representing 38 percent of world reserves, with a high

concentration in five countries: China (34 percent), Australia (23 percent), India

(18 percent), Kazakhstan (10 percent) and Indonesia (8 percent). Russia’s coal

reserves amount to 173,074 million short tons, about 18 percent of world reserves.

Asia’s hydropower technical potential amounts to about 5,980 terawatt hours

(TWh) per year, accounting for 37 percent of global potential, while the total

generation in 2011 amounted to about 37 percent of the economically exploitable

potential. Three countries accounted for more than 75 percent of total generation:

China (61 percent), India (10 percent) and Turkey (5 percent). Generation in the

rest of non-OECD Asia5 in the same year amounted to 182 TWh, about 22 percent

of the economically exploitable potential. Russia’s hydropower potential amounts

to 1,670 TWh/year and accounts for about 10 percent of global potential.

Asia’s estimated geothermal potential amounts to about 63 gigawatts of electric

output (GWe) and about 78 to 90 percent of global potential, which is estimated

at 70–80 GWe.6 Asia’s potential is concentrated in five countries:7 (i) Indonesia,

with a potential estimated at about 27.8 GWe, an installed capacity of 1,340

megawatts of electric output (MWe) and annual power generation of 9,600 GW

hours (GWh); (ii) Japan, with a potential estimated at 23.5 GWe,8 and an installed

capacity of 500 MWe; (iii) the Philippines, with a potential of 6 GWe, an installed

capacity of 1,870 MW, the second largest in the world, and annual power

generation of 9,646 GWh; (iv) New Zealand, with an estimated potential of 3.65

GWe, an installed capacity of 1,005 MWe and annual power generation of 7,000

GWh; and (v) Turkey, with an estimated potential of 2 GWe, 9 an installed

capacity of 397 MWe and annual power generation of 3,127 GWh. Russia’s

geothermal potential is estimated at 2 GWe.

Asia’s solar resources are estimated at 119,536 TWh/year, about 30 percent of

the global potential. China, Australia and India account for 52 percent of the

5 Non-OECD Asia is defined by the IEA as: Bangladesh, Brunei Darussalam, Cambodia, China, Chinese Taipei,

India, Indonesia, the Democratic People’s Republic of Korea, Malaysia, Mongolia, Myanmar, Nepal, Pakistan,

the Philippines, Singapore, Sri Lanka, Thailand, Vietnam, and other Asian (definition of the United Nations

Statistics Division) countries and territories. Furthermore, the IEA notes that: “Individual data are not available

and are estimated in aggregate for: Afghanistan, Bhutan, Cook Islands, Fiji, French Polynesia, Kiribati, Lao PDR,

Macau (China), Maldives, New Caledonia, Palau, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste,

Tonga and Vanuatu” (IEA, 2014, World Energy Outlook 2014, Paris). 6 Subir Kumar Sanyal, et al (2016), “Comparative Analysis of Approaches to Geothermal Resource Risk

Mitigation: A Global Survey,” Energy Sector Management Assistance Program (ESMAP), Knowledge Series

024/16, Washington, D.C., World Bank Group. 7 Geothermal data for the five countries come from the International Geothermal Association unless otherwise

stated. 8 Geothermal potential is an estimated value from heat energy stored at a depth of geological basement or

shallower. Source: “Japan – Renewed Opportunities,” Kasumi Yasukawa, National Institute of Advanced

Industrial Science and Technology (AIST), GRC Annual Meeting 2014, PowerPoint presentation. 9 Geothermal Country Update Report of Turkey (2010–2015), Proceedings of World Geothermal Congress 2015.

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potential. Asia is also endowed with modest onshore wind potential, about 11

percent of global potential, primarily located in China, Australia, Mongolia,

Afghanistan and Pakistan. Russia’s potential solar resources amount to 30,586

TWh/year, accounting for 8 percent of the world’s resources, and its wind

resources amount to 9 percent of the global potential.

The biomass potential of Asian countries for power generation, many of which

are still primarily agrarian economies, is recognized. Millions of people rely on

biomass, such as crop and forest residues, for their cooking and heating needs and

as a result are exposed to high indoor pollution. Several member countries have

set targets to develop their biomass resources to meet their SDG 7 and SEforALL

targets.

9. Energy production in Asia is characterized by fast increasing production of fossil

fuels. During 2000–2014, Asia’s fossil fuel production annual growth rate was: (i) 5.5 percent

for gas, more than twice the global production growth rate; (ii) 6.7 percent for coal, 1.7 times

the global rate; and (iii) 1.1 percent for oil, slightly higher than the global rate. Russia’s fossil

fuel production grew annually at 0.7 percent for gas, 2.8 percent for coal, and 3.6 percent for

oil during the same period.

10. There are significant challenges to achieving energy sustainability:

Rapidly growing primary energy consumption. Asia’s primary energy

consumption grew at 4.5 percent per year from 2000 to 2014, more than twice the

global growth rate of 2.2 percent. It increased from 3,528 million tons of oil

equivalent (Mtoe) in 2000 to 6,576 Mtoe in 2014, accounting for 84 percent of

the global increase in consumption during this period (Table 2). Of note, 98

percent of Asia’s consumption increase was driven by demand in non-OECD Asia.

Figure 1 below shows that China accounted for the largest share of Asia’s

consumption, followed by OECD Asia, India and the rest of Asia. In addition,

Russia’s primary energy consumption grew at 1.0 percent per year during 2000–

2014, much slower than either the global or Asian rate.

Table 2: Total Primary Energy Consumption (Mtoe)

By Region 2000 2014 CAAGR*

(2000–2014)

Asia 3,528 6,576 4.5%

China 1,175 3,066 7.1%

India 441 825 4.6%

OECD Asia 926 1,000 0.5%

Rest of Asia 986 1,685 3.9%

Russia 620 711 1.0%

World 10,057 13,699 2.2% * CAAGR – Compounded Annual Average Growth Rate

Note: numbers are rounded

Source: Table prepared from International Energy Agency (IEA) Database

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Figure 1: Breakdown of Total Primary Energy Consumption (2014)

Source: Figure prepared from IEA Database

Dominance of fossil fuels. Fossil fuels accounted for 93 percent of Asia’s

consumption increase during 2000–2014, and 85 percent of Russia’s consumption

increase during the same period, with non-fossil fuels making up the remainder

in both Asia and Russia. Figure 2 shows that in 2014, Asia’s reliance on fossil

fuels was 5 percentage points higher than the global average, 86 percent compared

to 81 percent. The higher percentage remains unchanged if Russia is added to

Asia.

Figure 2: Dominance of Fossil Fuels in Asia, Asia + Russia, and the World (2014)

Source: Figure prepared from IEA and United States Energy Information Administration databases

Declining energy intensity, but slower than the global average. Energy intensity

in Asian countries declined steadily during 2000–2014, indicating increased EE.

However, the decline of average energy intensity in Asia was less than the decline

in the global average. The average rate of reduction of Asia’s energy intensity was

greater during 2010–2014 than during 2000–2010. Regionally, OECD Asia

(excluding Turkey), Central Asia, Eastern Asia (excluding China) and

Southeastern Asia achieved the improvement rate in energy intensity needed to

China

3,066

India

825

OECD

Asia

1,000

Rest of

Asia

1,685

Russia

711

Unit: Mtoe

0

2000

4000

6000

8000

10000

12000

14000

World Asia+Russia Asia

Mto

e

Oil Coal Gas Biofuels & waste Nuclear Hydro Solar/Wind/Other Geothermal

Coal

(29%)

Gas

(21%)

Fossil

Fuel

(81%)

Oil

(26%)

13,699 Mtoe

Non-

Fossil

Fuel

(19%)

Coal

(40%)

Gas

(20%)

Fossil

Fuel

(86%)

7,286 Mtoe Non-

Fossil

Fuel

(14%)

Oil

(31%)

Coal

(43%)

Gas

(17%)

Fossil

Fuel

(86%)

6,576 Mtoe Non-

Fossil

Fuel

(14%)

Oil

(26%)

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achieve the EE objective of SEforALL (target of 2.6 percent decrease per year).

Russia’s energy intensity also declined by 35 percent during 2000–2014. Its

energy intensity decreased by 3.6 percent per year during 2000–2010 but slowed

to 1.6 percent per year during 2010–2014, which fell short of the SEforALL target.

Low access to modern energy. Asia’s population without access to electricity was

estimated in 2012 at 464 million, about 43 percent of the world population without

such access. Further, power system reliability in many countries does not meet

the standards required by sophisticated equipment and the connectivity needs of

households and businesses. According to the World Bank Enterprise Survey,10

unreliable electricity services have been identified by enterprises as a major

constraint in 10 Asian countries, including Afghanistan, Bangladesh, Georgia,

Iraq, the Kyrgyz Republic, Lebanon, Pakistan, Papua New Guinea, Syria and

Yemen. Moreover, according to the IEA, in 2013 about 2.7 billion people (about

38 percent of the world population) relied on traditional biomass combustion,

with over 2 billion (about three quarters of the total) located in Asia and 1.43

million in Russia. This exposes these populations to indoor pollution and

devastating health impacts. It is estimated by World Health Organization (WHO)

that about 4 million deaths per year are attributable to the lack of access to non-

solid fuels for use in lighting, cooking and heating.

Figure 3: Fuel Combustion-related CO2 Emissions (2014)

Source: Figure prepared from IEA Database

Rapidly increasing combustion-related carbon dioxide (CO2) emissions. Asia’s

fuel combustion-related CO2 emissions amounted to 17,362 Mt in 2014, up by 42

percent from its 2006 level. The growth rate, at 4.5 percent, was more than twice

the global average during the same period. Although Asia’s per capita energy

consumption is below the global average, it is growing at a rate 2.5 times faster

than the global average. Asia’s carbon intensity was on a steady downward trend

during 2006–2014, but at a slower pace than the rest of the world. Figure 3 shows

that in 2014, five countries (China, India, Japan, South Korea, and Iran) accounted

for more than three-quarters of Asia’s total emissions. Russia’s fuel combustion-

related CO2 emissions reached 1,468 Mt in 2014, amounting to 8 percent of Asia’s

emissions and 5 percent of the global total. Notably, Asia’s emissions grew at 3.6

percent per year during 2006–2014, much faster than the 0.6 percent global

10 Based on surveys of more than 125,000 firms globally.

China

9,087

India

2,020

Russia

1,468

Japan

1,189

South Korea

568

Iran 556

Others

3,943

Unit: Mt CO2

8

average, while Asia’s average per capita fuel combustion-related CO2 emissions

were 10 percent lower than the global average (4.47 tCO2/capita) in 2014.

Russia’s per capita emissions were practically stable during 2000–2014 at 10.3

tCO2 per capita, more than twice the global average.

Extensive local pollution. PM10 – the WHO Urban Air Pollution database 2016

indicates that 16 of the 20 cities with the highest concentration of PM10 are located

in Asia. The concentrations ranged from 256 to 540, amounting respectively to

about 13 and 27 times WHO’s recommended annual mean level. 11 PM2.5 –

another WHO report indicated that the 20 cities with the highest concentration of

PM2.5 in the world are also located in Asia.12 Concentrations ranged from 88 to

153, amounting to about 9 to 15 times WHO’s recommended annual mean level.

11. According to the IEA’s 2015 World Energy Outlook scenarios (Figure 4), global

energy investment during 2015–2040 would amount to US$68 trillion under the Current

Policies Scenario, US$69 trillion under the New Policies Scenario and US$75 trillion under

the 450 Scenario (in 2015 US$).13 The IEA further pointed out that current energy investment

trends “continued to shift in the direction of low-carbon sources and technologies, but not

fast enough to meet energy security and climate goals.”14 To meet the Paris Agreement goals

would require not only a significant investment increase, but also more focus on EE and

renewable energy (RE). Energy investment in Asia and Russia has been estimated based on

the 2014 World Energy Investment Outlook, 15 which focuses on energy investment

requirements (in 2012 constant US$) for the New Policies Scenario and the 450 Scenario

during 2016–2035:

Global investment would amount to about US$44 trillion under both the New

Policies Scenario and the 450 Scenario;

Asia’s investment would amount to about US$18 trillion under the New Policies

Scenario and US$18.7 trillion under the 450 Scenario; and

Russia’s investment would amount to about US$2.3 trillion under the New

Policies Scenario and US$2.5 trillion under the 450 Scenario.

11 Adam Shirley, formative content, World Economic Forum at www.weforum.org (12 May 2016). 12 Ross Chainey, Digital Media Specialist, World Economic Forum at www.weforum.org (25 June 2015). 13 According to the IEA, the Current Policies Scenario takes into account only formally enacted policies and

measures affecting energy markets as of mid-2015 and makes the assumption that these policies persist unchanged;

the New Policies Scenario is the central scenario of the Outlook and it takes into account the already adopted

policies and measures as of mid-2015, as well as other relevant commitments that have been announced, even

when the precise implementation measures have yet to be fully defined; the 450 Scenario takes a different

approach, adopting a specified outcome – the international goal to limit the rise in the long-term average global

temperature to two degrees Celsius (2 °C) – and illustrating how that might be achieved. 14 IEA (2016) World Energy Investment, page 159. 15 Team estimate based on the results of the World Energy Investment Outlook – Special Report, 2014 (IEA, Paris,

2014).

9

Figure 4: IEA 2015 World Energy Outlook Scenarios

Cumulative world energy sector investment, by sector and scenario (2015–2040)

Source: IEA World Energy Outlook 2015

Lessons Learned from MDB Energy Sector Investment in Asia

12. The Bank’s Strategy has been informed by the lessons drawn from evaluations of the

Asia portfolios of the Asian Development Bank, the European Bank for Reconstruction and

Development, the Islamic Development Bank and the World Bank Group.

13. The review by the Bank of the active Asia portfolios of these multilateral

development banks (MDBs) indicates that:

Transmission and distribution (T&D) financing accounted for the largest share

of the MDBs’ sovereign portfolios, ranging from 31 percent to 48 percent of total

support to the public sector. For non-sovereign or private windows, T&D

financing accounted for only 3 percent to 14 percent of total support to the private

sector, reflecting the public sector dominance in this segment of the power

industry in Asia.

Zero carbon investments (EE and RE) accounted for between 20 percent and 41

percent of the total public loans and grants provided by each organization. They

also accounted for a large share, from 39 percent to 67 percent, of the non-

sovereign financial support. Intermittent (wind and solar photovoltaic) and still

high-cost RE (geothermal and concentrated solar power) benefitted from grants

and concessional lending. Examples of grant providers include the Global

Environment Facility (GEF), Clean Technology Fund, Scaling up Renewable

Energy Program, and International Development Association.

Support to public thermal generation projects accounted for 7 to 23 percent of

respective total sovereign loans. Support to private sector thermal generation

accounted from 3 to 30 percent of total respective support to private sector energy

investments.

10

Financing of upstream activities (oil, gas and coal) accounted for 2 to 10 percent

of total support to public energy projects. They accounted for 6 to 17 percent of

total support to private sector projects. The number of projects and loan amounts

were limited for sovereign and moderate for non-sovereign operations.

14. Evaluations of completed energy projects. Evaluations by other MDBs’ independent

evaluation departments show that the performance of energy projects has usually been higher

than the average performance of overall portfolio. For projects that performed less well, many

of the implementation problems concerned failure to address weak or inadequate legal and

regulatory frameworks and to effectively implement institutional reforms related to

corporatization, restructuring and privatization of energy subsectors.

15. Lessons relevant to the Bank’s Strategy:

T&D operations are straightforward in preparation and generally do not raise

controversial or complicated implementation or policy issues. They should,

however, integrate technological advances to improve management and

efficiency of networks and empower consumers.

Investments in RE and EE (especially at the demand-side level) are fragmented

and require, in most cases, access to grants and/or concessional financing. They

also require specialized skills and financial intermediation, especially for EE

operations.

Addressing institutional issues requires extensive policy analysis and dialogue,

and the ability to provide technical assistance, often on concessional terms.

There are ample opportunities for investments in oil and gas extraction as clients

seek to improve the security of their energy supplies. However, such projects tend

to involve higher risk and must be subject to thorough assessment.

Objective of the Energy Sector Strategy

16. The objective of the Strategy is to provide the framework, principles, and operational

modalities to guide the Bank’s energy sector engagement, including the development of its

project pipeline and future subsectoral lines of business.

17. The Strategy embraces, and is informed by, the principles underpinning SEforALL,

the 2030 Agenda for Sustainable Development, and the Paris Agreement (see Box 1 above).

It lays the framework for the Bank to support its client countries to: (i) develop and improve

their energy infrastructure; (ii) increase energy access; (iii) facilitate their transition to a less

carbon-intensive energy mix; and (iv) meet their goals and commitments under these global

initiatives.

18. The Strategy is consistent with the Bank’s “Lean, Clean, and Green” core values and

its institutional goals. The Strategy embodies the Bank’s three thematic priorities: sustainable

infrastructure, cross-country connectivity and private capital mobilization. Implementation

of the Strategy will be informed by the strategic and sectoral planning processes of its

members at the regional, national and subnational level; it will also benefit from the work

undertaken by other development partners in this sector. Regular monitoring and reporting

11

of portfolio composition will be an important discipline and help build a portfolio that reflects

the Strategy and is aligned with the Bank’s core values.

Guiding Principles

19. The Energy Sector Strategy is developed around six principles, which will guide the

build-up of the Bank’s energy portfolio during the early years of operation.

20. Principle 1: Promote energy access and security. Lack of access or unreliable access

to energy services deprives the most vulnerable people of economic and other opportunities

to improve their lives. Bank financing for improved energy access and security will support

clients in achieving Sustainable Development Goal 7 (SDG 7). The Bank will place emphasis

on: (i) promoting, directly or indirectly, access to modern energy by those who currently have

little or no access; (ii) improving the reliability of electricity supply; and (iii) reducing the

negative health impacts caused by indoor combustion of solid fuels. In all these, gender will

be considered. According to the IEA,16 achieving universal electricity access for basic human

needs by 2030 (Figure 5) would increase global greenhouse gas emissions by just 1.3 percent.

Figure 5: Access to Modern Energy Services

Source: Energy for a Sustainable Future: Summary Report and Recommendations, United Nations Advisory

Group on Energy and Climate Change, 28 April 2010, New York, page 13

21. Principle 2: Realize energy efficiency potential. International experience and

primary energy forecasts by international institutions indicate that EE is one of the major

means to achieve global environmental objectives. Prosperity and wellbeing can no longer

be gauged by the consumption of energy but by the services derived from it. Given the high

energy intensity in most non-OECD countries in Asia, the Bank will cooperate with other

MDBs operating in Asia to tap the existing large, but dispersed, potential for EE in industry,

buildings, and transport. Initially, the Bank will focus on projects that make the most of

existing energy infrastructure stocks through: (i) rehabilitation and upgrade of existing

generation plants, and (ii) aggressive loss reduction and utility-driven EE programs in power

16 IEA (2009) World Energy Outlook, page 132.

12

and gas T&D networks. Over time, it will also develop financial instruments and engage with

potential financial intermediaries in these areas.

Figure 6: Increased Low-Carbon Energy Production

Source: IEA 2016 World Energy Investment

22. Principle 3: Reduce the carbon intensity of energy supply. Energy is the dominant

contributor to climate change, accounting for around 60 percent of total global greenhouse

gas emissions. The Bank will support clients to reduce the carbon intensity of energy to help

them achieve their long-term climate goals provided in the Paris Agreement. According to

the IEA 2015 World Energy Outlook (see Figure 4 above), energy infrastructure investments

need to be reshaped to meet the Paris Agreement goals:

Investments in fuel supply during 2015–2040 need to decrease from US$33 trillion

in the Current Policies Scenario to US$21 trillion in the 450 Scenario, mainly through

a considerable reduction in oil investments, a sizable reduction in coal investments,

and slightly lower investments in natural gas (although gas investments will remain

significant in all three scenarios);

Investments in power supply during 2015–2040 need to increase from US$20 trillion

in the Current Policies Scenario and the New Policies Scenario to US$22 trillion in

the 450 Scenario. The power sector overall will need to focus more on RE (which

will need to more than double to meet the goals of the Paris Agreement), and

sustained investment in power T&D.

The IEA 2016 World Energy Outlook confirmed the message above, and showed that more

ambitious investments would be required for RE and EE in the New Policies Scenario and

the 450 Scenario. A major shift in energy investment towards low-carbon sources of energy

was also reported by IEA in its 2016 World Energy Investment (see Figure 6 above).

23. The Bank will support energy investments that minimize adverse environmental

impacts and also reflect clients’ individual energy situations (e.g., energy resource

endowment, affordability of capital-intensive investments, security of supply, etc.). During

the transition to a lower carbon-intensive energy sector, fossil fuels will continue to play a

significant role in the energy mix of most member countries. The Bank will support and

accelerate its members’ respective transitions toward a low-carbon energy mix through

investments in RE and reduction of carbon emissions from fossil fuels.

24. Principle 4: Manage local and regional pollution. The Bank will support its clients

in reducing, limiting and mitigating the deleterious impact of pollution. Fossil fuel production,

transport and consumption have severe negative impacts on the local environment, especially

13

in Asia’s densely populated cities. Historically, issues related to local and regional pollution

have been addressed mainly by limiting emissions of fossil fuel-based power generation,

especially coal-fired plants. New projects are now being developed by MDBs and bilateral

agencies to address local pollution specifically and comprehensively, to counter the negative

impacts on health and wellbeing. The Bank will cooperate with other MDBs and bilateral

agencies on these initiatives.

25. Principle 5: Catalyze private capital. The Bank is committed to promoting private

sector investments to help close the enormous infrastructure investment gaps in developing

Asia. For varying reasons, to date, private capital investments in energy and infrastructure

have been marginal in non-OECD countries, although partial credits, investment and country

guarantees by MDBs have been instrumental in promoting successful projects in several

countries. Innovative approaches have also been initiated using grants and concessional

financing in some countries to reduce the cost of electricity generated under public-private

partnerships (PPP) and/or to improve risk sharing in PPP ventures. The largest concentrated

solar power generation project in Morocco supported by the World Bank and African

Development Bank and the geothermal project supported by the World Bank in Indonesia

are representative of the former approach, whereas the envisaged support of a geothermal

PPP project in Nicaragua by the World Bank is illustrative of the latter. The Bank will: (i)

explore innovative models to catalyze private investments, and significantly increase their

contribution to meet the infrastructure needs of countries in Asia, especially those that are

budget-constrained; (ii) build upon the successful experience of and lessons learned by

MDBs operating in Asia, especially in PPPs, ensuring that the costs and risks are

appropriately shared and distributed; (iii) explore with clients and private partners new

cooperation modalities to meet country needs; and (iv) in doing so, avoid crowding out the

private sector. When pursuing such opportunities, the Bank will evaluate risk carefully and

ensure that appropriate measures are put in place to mitigate and manage such risks.

26. Principle 6: Promote regional cooperation and connectivity. Regional integration

and cooperation are essential to take advantage of synergies, increase market size to improve

competitiveness, and create a critical mass for cooperative R&D and manufacturing

capabilities. Efforts deployed by MDBs and bilateral agencies in Asian countries and other

regions have had moderate success. The Bank will engage client countries and pursue

regional connectivity of energy systems in Asia, especially power and gas, with a view to

strengthening systems; improving the security and efficiency of energy supply; optimizing

the use of resources; allowing for greater flexibility in their operation; reducing local,

regional and global adverse environmental and social impacts; and fostering greater use of

RE resources.

Implementation

27. The principles outlined above will guide the Bank’s investment approach in the

energy sector in its early years. As the Bank matures, accumulates experience, and its

portfolio develops, these principles and the investment approach will be reviewed from time

to time.

28. A future review of the Strategy would take into account the lessons of experience and

integrate, for example, the following:

14

Advances in scientific knowledge as emerging technology opportunities become

available to accelerate the transition to sustainable energy systems (e.g., power and

thermal storage), improve operational efficiency along the power supply chain (e.g.,

digitization), and facilitate better use of fossil fuel by limiting carbon and methane

emissions (e.g., through carbon capture and storage); and

Changed economic circumstances, as costs of RE technologies, especially wind and

solar, are expected to continue the decreasing trend experienced over the last decade.

29. Application of the guiding principles will take into account, to the extent possible,

client countries’ constraints and uniqueness. Bank support to countries will be aligned with

their national energy investment plans/strategies, including their NDCs under the Paris

Agreement. All projects financed by the Bank will go through a comprehensive due diligence

process to ensure that they meet the requirements of the Bank’s Environmental and Social

Framework (ESF).

Sectoral Approach

30. The Bank’s process for selecting projects will focus on projects that, among others:

improve country and regional connectivity; promote efficiency along the supply chain; and

use proven, transformational, low carbon-intensity technologies that are economically and

financially viable.

31. Power T&D. Power grid infrastructure development will be an essential component

of the Bank’s connectivity strategy and promotion of regional cooperation. Support for the

development of T&D infrastructure remains indispensable to ensure transfer of generated

electricity to demand centers without the bottlenecks and high losses that are hampering

economic growth in many Asian countries. MDBs operating in the region have deployed

great efforts but substantial investments are still needed to achieve SDG 7 and SEforALL

goals of access to modern energy and allow smooth RE integration into power systems.

32. In 2015, global investments in T&D amounted to US$262 billion, or about 15 percent

of total infrastructure investments. They are expected to increase, as greener infrastructure

will require increased support to RE sources, which are generally far from load centers.

International experience also indicates that strong transmission networks allow higher

penetration of intermittent RE. In common with most MDBs, lower risk T&D projects are

good vehicles for the Bank to build its project pipeline in the early years of operation. Support

for power T&D is expected to be one of the core areas for Bank interventions, alone or in

association with other MDBs or bilateral agencies. The Bank will support: (i) new T&D

projects to increase power systems’ resiliency to natural disasters, and assist member

countries in “leapfrogging” to state of the art T&D technologies, digital solutions and smart

grids to empower consumers, and operate systems efficiently; and (ii) rehabilitation and

reinforcement of existing networks to increase their resiliency to natural disasters, reduce

technical losses, allow smooth integration of intermittent RE and improve reliability of

supply. Despite the generally lower risk of T&D projects, attention will be paid in their design

to potential social impacts and risks of ecosystem fragmentation.

33. Energy efficiency (EE) investments. Figure 4 above shows that limiting the world’s

rise in average temperature to “well below 2 degrees Celsius above pre-industrial levels”

15

(450 Scenario) would require more than doubling global EE investments. Demand-side EE

investments are in most cases economically justified but financially challenging because of

pervasive subsidization of fossil fuels and electricity. They are also usually small and

fragmented. Their implementation requires financial intermediation and capacity building, as

indicated by the most successful public and private sector projects implemented by MDBs to

date. For example, investments in EE in new as well as older buildings, especially housing

and small and medium enterprises, are often small-scale and might require retailing channels

and specific financial instruments (such as financial intermediary loans) and technical

assistance to build client capacity. Most EE activities undertaken by MDBs have been

supported by grants to build the capacity of financial intermediaries to evaluate potential EE

projects and monitor achievements during their implementation. At present, the Bank does

not provide such technical assistance; however, it will cooperate with multilateral, bilateral

and other partners to address this constraint.

34. The Bank will proactively support generators and utilities to: (i) improve the use of

existing electricity generation stocks through rehabilitation, to reduce fuel consumption,

introduce predictive maintenance methods, and upgrade regulation systems; (ii) develop and

implement loss reduction programs at all levels of the electricity supply chain and demand-

side management programs; (iii) design and implement utility-driven final use efficiency

initiatives, such as green lighting and improvement in insulation of buildings; and (iv)

enhance the efficiency of district heating networks and extend them to meet the needs of

rapidly urbanizing cities. While developing the skills and approaches to develop its own

portfolio, the Bank will partner with MDBs and bilateral agencies operating in the region to

scale up efficiency programs.

35. RE investments. RE investments are essential to limit CO2 emissions. The Bank will

support clients to develop intermittent RE—hydropower, wind, solar, and other sources—to

reduce fossil fuel consumption and increase access to modern energy through decentralized

generation, and mini- and micro-grids. Data collected to date indicate that: (i) out of the 20

countries with the largest wind potential, only 4 are in Asia; (ii) out of the 20 countries with

the largest solar potential, 8 are in Asia; and (iii) about two-thirds of the hydropower potential

in Asia is untapped. Currently, the Bank does not manage grant funds other than its Special

Fund for project preparation. To further promote RE development in client countries, the

Bank will proactively:

Support hydropower that is technically, economically, financially, environmentally

and socially viable, in a manner consistent with the provisions of the Bank’s ESF,

good practices, and lessons learned from other MDBs operating in Asia and

elsewhere. Development of hydropower, of different scales, in an environmentally

and socially sound manner could make an important contribution to sustainable

energy supply. This includes multi-purpose, run-of-the-river and pumped storage

hydropower investments. The Bank has already engaged in co-financing the

upgrading of generation capacity and rehabilitation of existing hydropower

infrastructure to improve efficiency and dam safety. It will continue to pursue such

capacity upgrading, rehabilitation and dam safety opportunities at existing facilities

as they arise, where possible in combination with intermittent RE generation. The

Bank’s support for development of hydropower will seek to improve quality, more

16

comprehensively address environmental and social issues, and reduce the risk of

these investments for the public and private sector.17

Support intermittent centralized and decentralized RE generation. For wind and

solar, the Bank will build partnerships with other MDBs and bilateral agencies

operating in Asia, and seek access to grants from global funds and partners, to

improve the financial viability of investments in intermittent renewable

technologies, and to share associated risks. The Bank will also promote distributed

generation (e.g., mini- and micro-grids) to reduce burdens on centralized systems,

increase RE penetration, and improve reliability of power supply.

Support selected countries (including possibly high-income countries with sizable

intermittent RE resources and the financial capacity to support them) to develop

innovative and transformative projects, particularly solar with adequate storage.

The Bank will explore the development of transformative, but still high-cost,

technologies such as concentrated solar power, to contain consumption of fossil

fuels and help create a market of scale for such technology. The latter could be done

through increased cooperation among Asian countries, to tap the synergy of

regional technological and manufacturing capabilities and make the RE programs

more affordable and replicable at lower cost.

Support the development of the significant geothermal resources identified in many

Asian countries, alone or in partnership with other MDBs and bilateral agencies,

through the development of new approaches to reduce resource risks. Sovereign

loans to governments or state owned entities could be considered to confirm

resources prior to requesting private sector proposals for power generation or PPP

approaches based on appropriate resource risk sharing.

Support, when appropriate and sustainable, modern biomass technologies to meet

country energy needs, especially in rural areas, and development of biofuels, with

particular attention to environmental and social impacts, including ecosystems,

biodiversity and food security.

36. Local and regional pollution management. Stand-alone local and regional pollution

management projects represent an emerging area of focus for MDBs operating in Asia. These

projects address the debilitating impacts of local and regional pollution on Asian economies

and populations. Economic valuations of local environment externality costs are country- and

even sub-region-specific for these projects. They require detailed studies of the negative

impacts of pollution on the economy and health of the population, as well as a broad range

of economic assumptions, including sensitive assumptions such as the valuation of lost lives.

The results of high-quality studies carried out in developed and some developing countries

can, under carefully determined assumptions, be transferred to Asian countries where fewer

studies have been carried out. The Bank will assist client countries in reducing local and

17 This could be undertaken, where appropriate, as a two-phase process that would comprise: (i) a first phase to

support basin-level hydropower planning, including strategic technical, economic, financial, environmental and

social studies, leading to the identification of potential investments, to be followed by project-specific feasibility

studies covering the same issues; and (ii) a second phase to support the construction of the hydropower investment

and associated facilities, and implementation of the environmental and social mitigation and monitoring measures

adopted for the project.

17

regional pollution, in partnership with MDBs and bilateral agencies. Over time, it will

consider developing multi-sectoral approaches and instruments that contribute to the cleanup

of Asia’s highly polluted cities and/or regions. These could include initiatives addressing, for

example, the problems of acid rain (SO2), PM2.5, and smog, etc.

37. Fossil fuel power generation investments. The carbon intensity of power generation

investments in 2015 was more than 4 times what it should be to achieve climate change

stabilization in the next two decades (Figure 7). While fossil fuels will continue to play a

significant role in the energy mix of most of its member countries, the Bank will focus on

supporting and accelerating its members’ respective transitions toward a low-carbon energy

mix, including lower carbon emissions from fossil fuels. The Bank will finance investments

that are demonstrably compatible with a country’s transition toward sustainable, low-carbon

energy and internationally agreed targets. Supported fossil fuel-based generation facilities

would be expected to use commercially available least-carbon technology. In many countries,

gas-fired power generation would form part of such transition. Carbon efficient oil- and coal-

fired power plants would be considered if they replace existing less efficient capacity or are

essential to the reliability and integrity of the system, or if no viable or affordable alternative

exists in specific cases. The Bank will pay attention to the particular needs of its less

developed members.

Figure 7: Investments in the Electricity Sector (2015)

Source: IEA World Energy Investments 2016

38. Oil and natural gas processing, transportation and distribution. Private sector

involvement is more likely here than in other subsectors, as international oil and gas

companies have the technology and financial strength to support such projects in many cases.

In some countries in Asia, national oil and gas companies also are active in these subsectors

and governments may express interest in Bank financing. The Bank will support such

investments provided that they improve energy security or promote regional integration and

trade. The Bank will also consider development, rehabilitation and upgrading of natural gas

transportation (including storage) and distribution networks, and control of gas leakage, to

foster greater use of gas during the transition to a less carbon-intensive energy mix/power

sector, especially in Asia where such penetration is low compared to other regions.

39. Nuclear power generation. Financing of nuclear plants will not be considered by the

Bank. Should demand arise for very special cases of support for safety improvement, the

Bank could possibly consider engagement. The Bank does not anticipate developing the

18

highly specialized expertise required to be involved in technically complex and capital-

intensive nuclear projects.

40. Adaptation projects. Climate change adaptation is emerging as an MDB business line

in association with grant facilities, such as the Green Climate Fund (GCF), GEF and climate

change trust funds. A recent study18 on infrastructure finance noted “it was estimated that

between 10 and 15 percent of the (future) required infrastructure investment could be

attributed to making such investment (including adaptation) sustainable, by ensuring lower

emissions, higher efficiency and resilience to climate change.” The Bank will partner with

MDBs and bilateral agencies to support such efforts in the Asian countries most threatened

by climate change.

Cross-Cutting Issues

41. Global environmental and SEforAll goals and principles are widely accepted and

embraced by other MDBs, bilateral agencies, and clients. However, their realization is not

always straightforward. Green energy investments require: (i) new approaches to evaluate

their economic viability because they may not be economically justified according to the

assumptions traditionally used by most MDBs; (ii) highly skilled and diversified teams and

a solid knowledge base; (iii) addressing environmental and social aspects; (iv) taking gender

into account; and (v) effective coordination among sectoral teams within the financing

institutions to meet client needs efficiently. These issues are discussed below.

42. Developing a solid base for economic evaluation. The economic evaluation of

energy projects raises issues relating to the assumptions used for discount rates, carbon price

and externality costs of local pollution, such as: (i) high discount rates indicate a strong

preference for the present; (ii) low carbon prices underestimate the economic impacts of

climate change; and (iii) low local and regional pollution externality costs lead to pollution

levels beyond the absorption capacity of the environment, as experienced in most Asian cities.

The Bank will use an appropriate discount rate and shadow price for carbon emissions and

other externalities in its economic evaluation of projects to determine their economic viability.

Considering the lack of consensus about discount rates and carbon prices, the Bank will test

the robustness of its economic analyses using a range of different discount rates and carbon

prices.

43. Building highly skilled multi-disciplinary teams. Highly skilled teams are a

prerequisite to developing a strong and diversified energy portfolio. In line with its lean

approach to staffing, the Bank will progressively build a highly skilled and diversified team

of staff and consultants with recognized expertise in technical, economic, financial,

environmental and social aspects of project conception, preparation, evaluation and

supervision. For example, specialists with strong technical expertise in hydropower and

environmental and social issues are needed to engage with clients in developing hydropower

schemes. High-quality staff/consultants directly contribute to a high-quality portfolio and

successful project outcomes. In implementing the Strategy, the Bank will focus on

developing and deepening its sectoral expertise and knowledge. In the early stages of its

18 Amar Bhattacharya, Mattia Romani and Nicholas Stern, (2012) Infrastructure for Development: Meeting the

Challenge (London, Centre for Climate Change Economics and Policy Grantham Research Institute on Climate

Change and the Environment).

19

energy portfolio development, the Bank will build partnerships with other MDBs, bilateral

agencies, private financial institutions, think tanks and academia to ensure that its energy

team has timely access to existing knowledge bases and sectoral developments. The Bank

also recognizes the importance of a supportive policy environment for project success. While

the Bank does not foresee support for policy-based financing instruments, it may develop

programmatic loans and performance-based lending instruments that are tailored to client

needs and circumstances.

44. Addressing environmental and social aspects. The provisions of the ESF and the

Public Information Interim Policy will guide implementation of the Strategy. Energy system

impacts include not only climate change and air pollution, but also impacts on human

settlements, land use and livelihoods, as well as on water bodies, landscapes, ecosystems and

species. As appropriate, environmental and social assessment – both strategic and project-

specific – and other specialized instruments, including project-level grievance redress

mechanisms, will be used to address environmental and social aspects of operations. Climate

risks will be evaluated and mitigation and adaptation measures developed where appropriate.

In the case of financial intermediaries, attention will be paid to their capacity for

environmental and social management and careful screening of subprojects. The Bank is

developing a framework, including work led by the independent Compliance, Effectiveness

and Integrity Unit, to ensure policy compliance and grievance procedures to address

complaints in its energy sector operations, as in other sectors of the Bank’s work.

45. Taking gender into account. The Bank recognizes that access to modern, sustainable

energy and energy-based technologies can significantly enhance women’s lives by reducing

their time and labor burdens, improving their health, and providing them with opportunities

to engage in economic activities. Women can thus increase their incomes through

entrepreneurship, and young girls can attend school. The transition to sustainable energy

creates benefits and opportunities for both women and men, such as employment generation,

market opportunities, and better health conditions. The Bank will seek to ensure that

women’s needs and capabilities are taken into account in development of its energy portfolio,

and that women are included in project consultations.

46. Promoting collaborative approaches among infrastructure subsectors. In

developing its portfolio, the Bank will promote holistic approaches to energy sector

development. The Bank aims to: (i) ensure that its other sector strategies recognize the

importance of energy and incorporate EE in the Bank’s core business; and (ii) promote intra-

sectoral collaboration to meet client needs in the most efficient way and maximize synergies

among the different subsectors. Examples may comprise: EE and sustainable urban

infrastructure, including energy efficient buildings; transport sector initiatives that improve

carbon and EE outcomes; multi-purpose dams with agricultural, industrial and urban sectors

as users; and access to modern energy within the rural development and agricultural sectors.

Results Monitoring Framework

47. The Bank will monitor outcome and output indicators to assess the alignment of its

evolving energy portfolio with the Strategy principles. A preliminary Results Monitoring

Framework is attached in Annex 2.

20

Annex 1: Definitions for Asia and Region and Income Classification

In this document, references to “Asia” and “Region” include the geographical regions and

composition classified as Asia and Oceania by the United Nations. This definition does not

include Russia. However, Russia is a regional member of the Bank and therefore is listed

separately, or additionally, in various places in this document. In this analysis, the Asian

countries are broadly divided into 3 groups:

- Five Members of the Organisation for Economic Co-operation and Development

(OECD). They are Japan and South Korea from Eastern Asia, Australia and New

Zealand from Oceania, and Israel from Western Asia.

- Three individual countries – China, India (Non-OECD) and Turkey (OECD), are

examined separately from their regions because of their size or their different energy

characteristics.

- The Rest of Asia, which is defined as Asia excluding 6 OECD countries, China and

India. The Rest of Asia is then classified into six subregions: Eastern Asia, Southern

Asia, Southeastern Asia, Central Asia, Western Asia and Oceania, according to the

geographical classification adopted by the United Nation Statistics Division (UNSD)

(Figure A.1). Regionally, 23 countries/territories are in Oceania, 16 in Western Asia,

11 in Southeastern Asia, 8 in Southern Asia, 4 in Eastern Asia, and 5 in Central Asia.

Figure A.1: UN Geo-scheme of Regional and Subregional Groups

Note: Statistical regions as defined by UNSD. Antarctica is omitted.

Source: CC BY-SA 3.0 based on geographical subregions and breakdown by

country information obtained from unstats.un.org/unsd/methods/m49/m49regin.htm

The Asian countries can also be grouped into four income classes according to World Bank

Income Classification Criteria.19 As illustrated in Figure A.2, there are 3 countries /

19 Low-income economies are defined as those with Gross National Income (GNI) per capita, calculated with the

World Bank Atlas method, of US$1,025 or less in 2015; Lower-middle-income economies are those with a GNI

per capita between US$1,026 and US$4,035; Upper-middle-income economies are those with GNI per capita

between US$4,036 and US$12,475; and high-income economies are those with GNI per capita of US$12,476 or

more. Source: datahelpdesk.worldbank.org/knowledgebase/articles/906519

21

territories classified as low-income; 26 as lower-middle-income; 20 as upper-middle-

income; and 19 as high-income.20

Figure A.2: Income Classification of Countries in Asia

20 In total, 68 countries/territories, as data for the remaining 7 Oceania countries are not available from World

Bank database.

22

Annex 2: Preliminary Results Monitoring Framework

The Bank intends to monitor the implementation of the Strategy as its energy portfolio

develops. This preliminary Results Monitoring Framework, which applies to the energy

portfolio of the Bank, is based on client country achievement of the following outcomes: (i)

increased access to modern energy services in client countries with special focus on low-

income ones; (ii) improved EE; (iii) reduction of carbon intensity of energy supply; (iv)

reduction of local and regional pollution; (v) increased private sector participation and (vi)

improved energy trade. This preliminary Results Monitoring Framework will be a work in

progress during the Bank’s early years of operation. The country- and portfolio-level

monitoring indicators will be revisited and refined as the necessary data is evaluated and

collected at the operational level. Some of the indicative indicators raise significant

methodological and measurement challenges, for example, the reference to an appropriate

baseline for the measurement of primary energy consumption saved. The Bank will draw, to

the extent possible, from the experience of other MDBs in this area.

Outcome Country Level

Monitoring Indicators

Output Portfolio Level

Monitoring Indicators

Assumptions

1. Increased

access to

modern energy

1.1 Increased access to

electricity:

In all client countries

In low-income

countries

1.2 Increased access to

clean fuels and

technologies for cooking

and heating:

In all client countries

In low-income

countries

1. Increase in

investments in

energy access

1.1 Amount of Bank

investments in energy

access (US$)

1.2 MW of total generation

installed

1.3 Km of T&D lines/

pipelines financed

1.4 Number of households

with access to electricity

(grid and non-grid) and

clean sources of lighting,

cooking and heating

Strong partnerships

with MDBs,

bilateral agencies

and private sector

operating in Asia

Continued focus of

client countries on

infrastructure and

connectivity

investments to

improve access

2. Improved

EE

2.1 Energy intensity

reduced in client

countries

2. Investments in

EE increased

2.1 Amount of Bank

investments in EE (US$)

2.2 Primary energy

consumption saved

Strong commitment

of client countries to

NDCs

Access to GCF

and/or other grant

funds

3. Reduction

of carbon

intensity of

energy supply

3.1 Lowered greenhouse

gas emissions (tons of

CO2 equivalent) per

energy use in client

countries

3.2 Share of RE in

primary energy

consumption in client

countries

3. Investments in

RE increased

3.1 Gross greenhouse gas

emissions (tons of CO2

equivalent) per MWh

generated

3.2 Amount of Bank RE

investments (US$)

3.3 Amount of other Bank

investments to reduce

carbon intensity of energy

supply (US$)

Strong commitment

of client countries to

NDCs

Access to GCF

and/or other grant

funds

23

Outcome Country Level

Monitoring Indicators

Output Portfolio Level

Monitoring Indicators

Assumptions

4. Reduction

of local and

regional

pollution

4.1 Increase in number of

cities in client countries

meeting WHO target

levels of annual mean

concentration of PM10

and PM2.5

4. Investments in

local pollution

management

increased

4.1 Amount of Bank

investments in local

pollution management

(US$)

Strong partnerships

with MDBs,

bilateral agencies

and private sector

operating in Asia

Strong commitment

and willingness of

client countries

5. Increased

private sector

participation

5.1 Increased private

sector investments in

client countries

5. Increase in

investments in

mobilizing private

capital

5.1 Private sector

investments leveraged by

the Bank (US$)

Strong commitment

and willingness of

client countries

6. Improved

energy trade

6.1 Increased cross-

border trade of electricity

and natural gas in client

countries

6. Increase in

investments to

support cross-

border trade of

electricity and

natural gas

6.1 Amount of Bank

investments to support

cross-border trade of

electricity and natural gas

(US$)

Strong commitment

and willingness of

client countries